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Everything posted by EdLaFave

  1. The idea that somebody can eek out superior performance by dynamically changing their asset allocation and/or moving money into and out of the market is the single biggest reason investors under-perform the market, it makes high fees look negligible (they're not). Happily for you, by moving the money from international into a domestic fund you've come out ahead this time (although we can't say that for sure until you go back to your original asset allocation). I'm genuinely happy that's the case, but you achieved this gain by moving away from your desired asset allocation, which is suboptimal. Is what you specifically did the biggest sin in the world? Absolutely not, but you can TLH without modifying your asset allocation. For anybody reading, TLH (Tax Loss Harvesting) is when you realize a loss in your taxable account by selling, which allows you to apply a $3,000/year deduction to your income taxes. This can be a nice little consolation prize for suffering through a bear market. I've executed TLH sales several times over the last month (as well as recent pullbacks like 2016 and 2018) and I may be able to do it again in a few weeks. However, it is highly advisable to immediately move the proceeds of a TLH sale into a comparable fund, but not a "substantially identical" fund as the IRS likes to say. For example, you could exchange shares of VTIAX (Vanguard Total International) for shares of VFWAX, which essentially has the same performance as VTIAX, but lacks emerging markets. However, if you were to exchange from a Vanguard Total Market fund to a Fidelity Total Market fund then you might be breaking IRS rules. Unfortunately they haven't explicitly defined what "substantially identical" even means!
  2. Since 3/23/2020 international is up 15.38% and domestic is up 18.68% and it looks like we're set for a strong opening today as well. Absolutely anything can happen in the future, maybe the market drops another 40% from here? Maybe we've seen the worst of it? I don't know. If anybody re-reads these threads I hope they can learn from Bogle's words, "Don't do something. Just stand there!" Pick an asset allocation that will prevent you from panic selling when recessions hit (as they certainly will) and all you have to do from then on is just dump every spare dollar into your investments and don't sell until you need money in retirement. Give up on the notion that you can predict the market or you can execute some maneuver that'll save you from temporary pain; you can't.
  3. I suspect virtually nobody actually reads papers. They're told that the trinity study demonstrated that 4% is the safe withdrawal rate for retirement then they repeat it. Then you have entire FIRE communities repeating it until it becomes gospel. There's a subset of the FIRE community that I'm interested by. Most (all?) of these folks are in very high paying jobs, which often means they face two choices: Retire now, cut expenses to the bone, and if things don't go great then maybe pick up a part time "barista" like gig. Work another year or two at your current job and really solidify your nest egg. I'm intrigued by the folks who pick Option 1. Personally I'd hate the "barista" job in and of itself and I'd hate it even more due to the significant pay disparity between my career job and I'd hate the degree of uncertainty that my future rests on even more. I understand that people don't want to work more than they have to and they want to find a way out of their current less than enjoyable situation. I REALLY get that, but the risk-reward just doesn't add up to me. Sometimes I wonder if these high paying professionals have romanticized the so called unskilled jobs.
  4. You’re speaking to my soul with that one Steve. Why have we made living so stressful!
  5. I’ve looked at the math and even with all equities, I wouldn’t feel comfortable with only 25x annual expenses (what a 4% withdrawal rate requires) and a 60 year retirement window. I would however feel comfortable with 33x annual expenses (what a 3% withdrawal rate requires), that’s especially true if you get there during a bear market or early into a bull market. I fear that people who FIRE with 25x may not fully understand the risk because they may believe that the authoritative “trinity study” applies to them and it doesn’t. Still they’re more likely than not to be fine, but I personally want a 99%+ chance of success before I pull the trigger.
  6. DCA (as it applies to a pile of cash) mitigates risk in the sense that you aren't invested in the market, but not being invested in the market isn't a valid strategy. Bonds are a valid risk management strategy, sitting on cash is speculative and locking in the erosion of inflation. One easy way to see what a poor risk mitigation strategy DCA is, is to imagine somebody who is already fully invested and they're scared of market risk. Nobody in their right mind would ever recommend that this person take a lump sum out of the market and slowly dribble it back into the market. Sure doing so reduces risk, but I think we can all see how foolish that approach would be. The reason people can't see how foolish it is if somebody has a windfall is because we're incorrectly anchoring to the value of the portfolio on the day of the windfall and for a reason I can't explain people don't seem to anchor to the value of the portfolio on the day they're fully invested (at least in the context of DCA). Investing everything you have in the market isn't speculation or a gamble. Investing in single stocks is a gamble. Investing for the short term is a gamble. Investing in a single sector is a gamble. Putting all of your portfolio into the market is just plain investing. However, pulling money in or out of the market based on short term gyrations...that my friend, that's speculation.
  7. Yes. Time out of the market, on net, hurts returns. On average the stock market obviously goes up, otherwise we wouldn't put money in it. So if you sit on a pile of money for a fixed amount of time and slowly drip it into stocks, then statistically speaking you will miss out on gains (not losses). That's why you hear the phrase "time in the market, not timing the market" (or something along those lines). Of course, if you look at any individual time period you either lost or you won, but you're more likely to lose with DCA. The only utility of DCA is convincing fearful people stuck in a fallacy to get their money in the market. Of course I'd argue strongly that if they're so fearful then the real problem is their asset allocation. Now if you're just putting money in the market each time it becomes available to you (i.e. payday) then I don't really consider that to be a strategy. You're just investing whenever you can, not when you choose to believe it is a "good" time to invest.
  8. People conflate DCA a lump sum with regularly investing money with each paycheck. The the former has a lower expected return, the latter is absolutely recommended.
  9. I believe the IRS explicitly ruled that you can create a wash sale between your taxable account and your IRA. I don't believe they've explicitly ruled about employer sponsored accounts. I believe the spirit of the wash sale is pretty clear that it should apply to all accounts, but until the IRS makes it explicit then we don't know for sure. I don't play in that grey area.
  10. Without getting into the weeds, the Wash Sale is relevant to 30 days before Tax Loss Harvesting and 30 days after. If you wait 31 days after the sale, you could have bought right back into the fund that you sold from. When people tax loss harvest they often want to avoid being out of the market. To accomplish this they will immediately exchange from the fund with a loss to another fund as long as that other fund isn't "substantially identical." This is why whyme talked about exchanging a total market us fund for an S&P 500, they both have extremely similar performance, but you can argue the absence of small and medium size companies in the S&P 500 fund prevents it from being considered "substantially identical." This is a mental accounting fallacy. It isn't logical to treat money that is currently in cash differently than money that is currently in the market. We all have a total portfolio (regardless of what assets it is split between) and we all have to make a decision (every day) as to how that money is or isn't invested. What your portfolio was invested in yesterday has no bearing on what it should be invested in today. Either you think it is a good to have Y dollars in the market or you don't, it doesn't matter where those dollars were invested yesterday. This is absolutely marketing timing and market timing is usually considered cautious/fearful. Decisions you make based on short term market movements and this idea that you can predict the short term future, well that's market timing. Market timers often find ways to do the wrong thing twice. During a bad market they won't put their money in because they're being cautious. During a bull market they'll pour it all back in because things are "good". The proverbial sell low and buy high.
  11. The IRS says that if you buy a "substantially identical" replacement then it'll trigger a wash sale, which you clearly do not want to do. The IRS has not explicitly defined what "substantially identical" means. Somebody could make the proposed exchange and claim a loss. However, in the event of an audit, I sure wouldn't want to be in the position of making the argument that those two funds aren't substantially identical. Just a word for anybody reading these comments. This is a form of market timing and is particularly dangerous because this is exactly how people miss the recovery after a crash. If you want to invest successfully accept the reality that nobody can predict the short term future so all you can do is buy and hold (no matter what is or isn't happening).
  12. Any time you ask yourself a question that begins with “given what the market is doing now” it is almost certainly going to lead you to engage in market timing You have to get comfortable with the idea that nobody can accurately predict what the market will do over the short term. Trying to time the market is probably the number one way people lose money. To answer your question, it’s always a good time to leave a high cost vendor for a low cost vendor.
  13. You haven't spent even a second providing proof at all. You've just gotten exasperated and said I was blatantly wrong without providing any argument.
  14. Tony, when I say something that is false, just provide the evidence and I'll immediately change my mind.
  15. My personal political views aside, the data is clear that we can’t both sides this. Fox News hosts have consistently and repeatedly reported things that are verifiably untrue. The same cannot be said for other outlets like CNN or the NY Times. Biases are subtle and subconscious and professionals do everything they can to overcome it, sometimes swinging too far in the other direction. Propaganda is something else entirely and for the sake of precision alone we shouldn’t confuse the two.
  16. I didn’t know that. I’m cheering for an immediate recovery. I don’t enjoy losing money, but I can think of one consolation prize of this well timed downturn 😁 😈
  17. haha, I’m old enough to remember Q4 of 2018 when we were within a hair of a bear market when the world’s two largest economies were locked in a pointless trade war. Nobody knows the future. I hope things get better quickly, but maybe they won’t. The huge market swings have really been something to see though.
  18. I don’t try to convince anybody to do anything because in my experience 90% of the time it is wasted energy. However, when people ask me how I feel, I tell them how much I’ve lost (usually quite a bit more than them) and how calm I am about dumping my next paycheck into the market. I think people find that level of confidence and emotional stability to be reassuring. I know nothing and I don’t think anybody else does either. For all I know the virus was just the spark that triggered the selling process on an already overvalued market rather than being the main driver behind the selling. Let’s assume the sell off is 100% because of the virus. Financially speaking, it seems like a virus with a low mortality rate is less scary than a fundamentally and structurally unsound financial system where every institution is on the brink of collapse. It wouldn’t surprise me at all if we bounce back from this within the next 12 months.
  19. What do you think is unique about this? Seems quite standard to me.
  20. If you save less than the IRA contribution limit (6k for those under 50, 7k for those over 50) the just stop the 403b and only use an IRA. If you save more than the IRA contribution limit then figure out what 403b and 457b vendors you have access to, stop National Life group, and fund some combination of an IRA and a better vendor (we need more information to be more specific on that split). NOTE: Your IRA doesn't have to be a Roth, it can also be a traditional. The same can be said for most 403b and 457b plans. The choice between Roth and Traditional should be made intentionally, you shouldn't simply default to a Roth IRA and a Traditional 403b.
  21. Maybe when the market closes today we will have officially crossed into bear market territory. I haven't looked, but I can do rough math and I know I'm down over 200k. I was/am considering early retirement, my current job is highly insecure, and I'm getting my roof replaced tomorrow. I'm told this is a recipe for emotional disaster, but I feel nothing. I get paid on Friday and I'll be buying stock with whatever is left after I pay my mortgage. If anybody needs a pep-talk to stay the course, let me know. Everybody knew this would happen, we just didn't know when. This changes nothing.
  22. I had to fact check this one after a friend mentioned it to me last night. https://www.snopes.com/fact-check/corona-beer-fear-coronavirus/
  23. I believe you were able to do this because he owned the 401k and you owned the 403b. I suspect if one of you had both accounts then you would have been in trouble.
  24. Another reminder to people concerned about having "too much" taxable income in retirement... That is likely a very good indicator that you worked much longer than you needed to! Retiring early is always something to consider.
  25. So your current 401k charges 0.50% plus whatever the expense ratios on the funds are. That's a lot and you're right, the three 403b vendors you listed would have lower fees. If I were in your shoes, I'd be generally advocating for lower fees. Moving to a Vanguard 403b is certainly one possible way to get there, but so is moving to a low cost 401k (presumably Vanguard offers that too). I wouldn't limit my focus to one of the many solutions to the overall objective. Don't confuse complexity with effectiveness. All you really need are three funds: Total Market Index Fund for domestic stock. Total International Market Index Fund for international stock. Total Bond Fund for bonds. For those that don't want to manage 3 funds you could throw in all-in-one funds too (they contain those individual funds under the hood): A fixed asset allocation fund like Vanguard's LifeStrategy funds. A target date fund that gets more conservative as you approach the target date like Vanguard's Target Retirement funds. So 29 funds is actually a lot more than you need (provided those 29 funds include the things I mentioned above). The number one thing I'd concern myself with is what tax deferred (401k, 403b, 457b, etc) plans will allow you to build a fully diversified portfolio at rock bottom costs. The number two thing I'd concern myself with is that it would be nice to have a 457b in addition to a 401k/403b because (and fact check me on this) the 19.5k limit is shared between 401k and 403b contributions but the 19.5k limit on 457b plans is in addition to the 401k/403b limit. So I'd be trying to maximize the amount of tax free space my employer provides me. The number three thing I'd concern myself with is the various differences between each type of account. For example the 457b has slightly different withdraw rules than the 403b does. However, this concern would be a distant 3rd.
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